Property Taxes in Cook County
1 Overview
The property tax system in Cook County is implemented across numerous government agencies including:
- the Legislature which sets the overarching rules
- the Assessor which sets assessments and handles appeals
- the Board of Review which handles appeals
- the Property Tax Appeal Board which handles appeals
- the Treasurer which determines tax bills
Each one of these government entities has made numerous choices which lead to our current property tax system. Detailed studies have repeatedly shown that the property tax system is inequitable and regressive. Billions of dollars of wealth are redistributed annually.
This report analyzes three key areas of the property tax system: assessments, appeals, and tax bills.
2 Assessments
This section uses First Pass (pre-appeal) assessments between 2010 and 2020. The data was downloaded from the Cook County open data portal on 9/18/2021. Only residential (non-condo) properties are included here. All sales under $1000 in value were excluded and the IAAO arm’s length measure was applied.
2.1 Sales Ratio Analysis
The relationship between assessments and sale prices is regressive if less valuable homes are assessed at higher rates (relative to the value of the home) than more valuable homes. To evaluate regressivity in assessments, Figure 2.1 presents a binned scatter plot of sales ratios against sale prices.
For this graph, property sales have been sorted into deciles (10 bins of equal size based on sale price), each representing 10% of all properties sold. Each dot represents the average sale price and average sales ratio for each respective decile of properties. This graph compares the most recent values for 2020 (solid line) with the average across all years of observation from 2010 to 2020 (dashed line). All values were adjusted for inflation to 2020 dollars to facilitate comparisons.
If sale prices are a fair indication of market value and if assessments were fair and accurate, Figure 2.1 would be a flat line indicating that sales ratios do not vary systematically according to sale price. A downward sloping line indicates that less expensive homes are over-assessed compared to more expensive homes and is evidence of regressivity.
In 2020, the most expensive homes (the top decile) were assessed at 8.5% of their value and the least expensive homes (the bottom decile) were assessed at 10.7%. In other words, the least expensive homes were assessed at 1.25 times the rate applied to the most expensive homes. Across our sample from 2010 to 2020, the most expensive homes were assessed at 8.6% of their value and the least expensive homes were assessed at 19.3%, which is 2.26 times the rate applied to the most expensive homes.
Figure 2.1
Figure 2.2 shows the share of properties in each decile that were overassessed or underassessed. relative to the median rate of assessment. That is, a property is classified as overassessed if its sales ratio is above the median sales ratio for the jurisdiction, and classified as underassessed if its sales ratio is below the median. If errors were made randomly, each decile would have 50% of properties overassessed and 50% underassessed. When lower value homes are more likely to be overassessed than higher value homes, it is evidence of regressivity.
In Cook County, 91% of the lowest value homes are overassessed and 23% of the highest value homes are overassessed.
Figure 2.2
2.2 Industry Standards
The previous section provides graphical evidence of regressivity in property assessments, but it does not provide a statistical evaluation. In this section, we report several standard statistics used in the evaluation of assessment quality.
The International Association of Assessing Officers (IAAO) defines standards for assessments including standards for uniformity and regressivity.
2.3 Coefficient of Dispersion (COD)
The COD is a measure of assessment uniformity, or horizontal equity. It is the average absolute percentage difference from the median sales ratio. For instance, a COD of 10 means that properties have ratios that on average deviate by 10 percent from the median ratio. The IAAO specifies that the acceptable range for COD is below 15, which is shaded in Figure 3.1.
For 2020, the COD in Cook County was 19.82 which did not meet the IAAO standard for uniformity.
Figure 3.1
2.4 Price-Related Differential (PRD)
The PRD is a measure of regressivity, or vertical equity. A PRD of 1 indicates that homes are assessed at the same rate regardless of their sale price. A PRD greater than 1 indicates that less expensive homes are assessed at higher rates than more expensive homes, while a PRD less than 1 represents the opposite situation. The IAAO specifies that the acceptable range of PRD is .98 to 1.03, which is depicted as the shaded region of Figure 3.2.
In 2020, the PRD in Cook County, was 1.018 which meets the IAAO standard for vertical equity.
Figure 3.2
2.5 Coefficient of Price-Related Bias (PRB)
The PRB is another quantitative measure of regressivity (vertical equity) which is an alternative to the PRD. PRB is a measure of how much assessed values change as a property’s market value increases. The IAAO specifies that the acceptable range for PRB is between -0.05 and 0.05, which is depicted as the shaded region in the Figure 3.3.
In 2020, the PRB in Cook County was -0.001 which indicates that sales ratios decrease by 0.1% when home values double. This meets the IAAO standard.
Figure 3.3
2.6 Sales Ratio by Decile by Year
The following Figure 3.4 replicates Figure 2.1 from Sales Ratio Analysis. For each panel of the Figure 3.4, the current year is highlighted in blue and other years are in gray.
Figure 3.4
2.7 Geography
Assessments also may be geospatially correlated, that is homes in a specific area may all be over or under assessed.
2.7.1 By Race (Census Tract)
2.7.2 Average Assessment Ratio from 2010 to 2020
2.7.2.1 By Census Tract
2.7.2.2 By Legislative District
3 Appeals
Appeals can be filed at the Assessor, the Board of Review, or the Property Tax Appeal Board. The Assessor releases data on appeals for the Assessor and Board of Review. The appeals process increases regressivity.
Each property receives three assessed values in a given year:
- First pass, initial assessments before any appeal
- Certified, assessments after Assessor appeal
- BOR/Final, assessments after Board of Review appeal and final assessments which are used to generate tax bills.
This section uses data from 2010 to 2020. The data was downloaded from the Cook County open data portal on 9/18/2021. Only residential (non-condo) properties are included here.
3.1 Appeals increase regressivity
3.2 Owners of high-value properties are much more likely to appeal
3.3 Net impact of appeals
3.4 More appeals are filed in white neighborhoods
3.5 Greater reductions in assessed value occur in white neighborhoods
3.5.1 Appeal Rates from 2010 to 2020
3.5.1.1 By Census Tract
3.5.1.2 By Legislative District
3.5.2 Percent Change in AV Post-Appeal from 2010 to 2020
3.5.2.1 By Census Tract
3.5.2.2 By Legislative District
4 Tax Bills
This section presents information on the effective tax rates for properties which sold between 2003 and 2019. The effective tax rate is calculated by taking the amount of tax paid in a given year divided by the sale price of the property.
Effective tax rates are impacted both by inaccurate assessments and local taxing levies. Many south suburbs have proportionally smaller levels of property value to the size of their jurisdiction’s property tax levy. This leads to significantly higher effective tax rates.